SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 1-4338
EAC INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
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New York 21-0702336
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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2111 CLARIDGE LANE, NORTHBROOK, IL
60062 (Address of principal executive
offices) (Zip Code)
(847) 509-8657
(Issuer's telephone number, including area code)
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. YES X NO
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
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Class Outstanding at April 30, 1999
Common Stock, par value $.10 per share 2,885,521 shares
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Page 1.
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- INDEX -
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Page(s)
PART I. Financial Information:
ITEM 1. Financial Statements
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Consolidated Condensed Balance Sheets - April 30, 1999 (Unaudited)
and January 31, 1999 3.
Consolidated Condensed Statements of Operations (Unaudited) -
Three Months Ended April 30, 1999 and 1998 4.
Consolidated Condensed Statements of Cash Flows (Unaudited) -
Three Months Ended April 30, 1999 and 1998 5.
Notes to Interim Consolidated Condensed Financial Statements (Unaudited) 6.
ITEM 2. Management's Discussion and Analysis or Plan of Operation 8.
PART II. Other Information 10.
SIGNATURES 11.
EXHIBITS:
Exhibit 27 - Financial Data Schedule
Page 2.
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PART I. FINANCIAL INFORMATION:
ITEM I. FINANCIAL STATEMENTS:
EAC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
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- ASSETS -
April 30, January 31,
1999 1999
---------------- ---------------
(unaudited)
CURRENT ASSETS:
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Cash $ 596,761 $ 467,910
Notes and accounts receivable - net of allowance for doubtful accounts
of $20,000 at April 30, and January 31, 1999, respectively 188,928 180,161
Inventories 87,466 60,041
Prepaid expenses 34,329 20,878
Due from buyer (Note 2) 80,000 -
Net assets of discontinued operations (Note 2) - 206,135
-------------------- -------------
TOTAL CURRENT ASSETS 987,484 935,125
-------------- -------------
PROPERTY, PLANT AND EQUIPMENT, NET 219,983 224,885
-------------- -------------
OTHER ASSETS:
Due from buyer (Note 2) 120,000 -
Costs in excess of net assets acquired - net 159,024 162,621
Other assets 4,404 4,404
---------------- ---------------
283,428 167,025
-------------- -------------
$ 1,490,895 $ 1,327,035
============ ===========
- LIABILITIES AND SHAREHOLDERS' EQUITY -
CURRENT LIABILITIES:
Accounts payable $ 158,306 $ 143,899
Accrued expenses 212,671 226,353
Long-term liabilities - current portion 19,160 26,142
--------------- --------------
TOTAL CURRENT LIABILITIES 390,137 396,394
-------------- -------------
LONG-TERM LIABILITIES - NET OF CURRENT PORTION 251,593 251,520
-------------- -------------
COMMITMENTS AND CONTINGENCIES (Note 4)
SHAREHOLDERS' EQUITY:
Common stock, $.10 par value; 20,000,000 shares authorized, 2,892,819
shares issued at April 30, and January 31, 1999 289,282 289,282
Capital in excess of par value 10,546,048 10,546,048
Accumulated deficit (9,937,563) (10,107,607)
------------- ------------
897,767 727,723
Less: Common stock in treasury, 7,298 shares at cost at
April 30, and January 31, 1999 (48,602) (48,602)
--------------- --------------
849,165 679,121
-------------- -------------
$ 1,490,895 $ 1,327,035
============ ===========
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The accompanying notes are an integral part of these consolidated statements.
Page 3.
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EAC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
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For The Three Months
Ended April 30,
1999 1998
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NET SALES $346,533 $388,368
-------- --------
COSTS AND EXPENSES:
Cost of products sold 238,404 278,851
Selling, general and administrative expenses 143,975 200,899
--------- ---------
TOTAL COSTS AND EXPENSES 382,379 479,750
--------- ---------
(LOSS) FROM OPERATIONS (35,846) (91,382)
--------- ---------
OTHER INCOME (EXPENSES):
Interest expense (1,478) (1,944)
Interest and other income 1,886 2,795
----------- -----------
408 851
------------ ------------
(LOSS) BEFORE PROVISION FOR INCOME TAXES (35,438) (90,531)
Provision for income taxes - -
--------------- ---------------
(LOSS) FROM CONTINUING OPERATIONS (35,438) (90,531)
---------- ----------
DISCONTINUED OPERATIONS (Note 2):
(Loss) income from operations of discontinued subsidiaries - net of taxes (34,736) (12,969)
Gain on disposal of operating assets of discontinued subsidiary - net of taxes 240,218 233,000
--------- ---------
205,482 220,031
--------- ---------
NET INCOME $170,044 $129,500
======== ========
BASIC INCOME PER SHARE (Note 3):
Continuing operations $(.01) $(.03)
Discontinued operations .07 .08
------ ------
$ .06 $ .05
===== =====
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 2,885,521 2,790,954
========= =========
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The accompanying notes are an integral part of these consolidated statements.
Page 4.
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EAC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
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For The Three Months
Ended April 30,
1999 1998
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:
CASH FLOWS FROM OPERATING ACTIVITIES:
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Net income $ 170,044 $ 129,500
Adjustments to reconcile net income to cash used by operating activities:
Depreciation and amortization 15,137 31,715
Gain on sale of assets (238,435) (197,000)
Change in assets and liabilities:
(Increase) decrease in accounts and notes receivable (56,356) 50,913
Decrease (increase) in inventories 164,984 (85,655)
(Increase) in prepaid expenses and other assets (5,684) (14,700)
(Decrease) in accounts payable, accrued expenses
and accrued income taxes (110,004) (12,576)
---------- ----------
Net cash (used) by operating activities ( 60,314) (97,803)
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets 200,000 197,000
Capital expenditures (6,926) (26,576)
----------- ----------
Net cash provided by investing activities 193,074 170,424
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from sale of common stock - 124,192
Payments of long-term debt (3,909) (22,312)
------------ ----------
Net cash (used) provided by financing activities (3,909) 101,880
------------ ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 128,851 174,501
CASH AND CASH EQUIVALENTS, AT BEGINNING OF YEAR 467,910 450,031
----------- -----------
CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 596,761 $ 624,532
========== ===========
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The accompanying notes are an integral part of these consolidated statements.
Page 5.
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EAC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION:
In the opinion of management, the accompanying unaudited interim
consolidated condensed financial statements of EAC Industries,
Inc. (the "Company") and its subsidiaries, contain all
adjustments necessary (consisting of normal recurring accruals
or adjustments only) to present fairly the Company's financial
position as of April 30, 1999 and the results of its operations
and cash flows for the three month periods ended April 30, 1999
and 1998.
The accounting policies followed by the Company are set forth in
Note 3 to the Company's consolidated financial statements
included in its Annual Report on Form 10-KSB for the year ended
January 31, 1999, which is incorporated herein by reference.
Specific reference is made to this report for a description of
the Company's securities and the notes to consolidated financial
statements.
The results of operations for the three-month period ended April
30, 1999 are not necessarily indicative of the results to be
expected for the full year.
NOTE 2 - DISCONTINUED OPERATIONS:
On March 1, 1999, the Company completed the sale of the
operating assets of Goodren Products Corporation ("Goodren") for
a price of $400,000 plus the assumption of all trade payable
liabilities. The payment terms are as follows: (i) $200,000 at
closing, (ii) $30,000 to be paid 180 days after closing plus
interest accrued at an annual rate of 7% (iii) $50,000 to be
paid 360 days after closing plus interest accrued at an annual
rate of 7%, (iv) $60,000 to be paid 540 days after closing plus
interest accrued at an annual rate of 7% (v) $60,000 to be paid
720 days after closing plus interest accrued at an annual rate
of 7%.
In June 1998, the Company completed the sale of substantially
all of the assets of Goodren Label Corporation (formerly Athena
Packaging Inc.) for an aggregate sale price of $277,000
including inventory valued at the lower of cost or market.
Certain reclassifications have been made to the 1998 financial
statements in order to conform to the 1999 presentation. These
reclassifications relate to the disposition of assets as
disclosed above.
NOTE 3 - EARNINGS (LOSS) PER SHARE:
Earnings per share has been computed on the basis of the
weighted average number of common shares outstanding during each
period presented, in accordance with the provisions of SFAS No.
128.
Page 6.
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EAC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 4 - CONTINGENCY:
Goodren withdrew from participating in the District 65 Union
Pension Plan (the "Plan"). This withdrawal resulted in the
assessment of a withdrawal liability owed to the Plan by
Goodren. During the year ended January 31, 1995, the Company
accrued a reserve for an estimated liability of $560,000 which
counsel to the Company believed would be payable over a period
of approximately 22 years beginning approximately one year from
the withdrawal date. In March of 1996, the Company signed an
agreement with the Plan whereby they will make quarterly
payments of $7,548. At September 30, 1996, the Company and
Goodren entered into a Settlement Agreement with the Trustees of
the union pension plan whereby Goodren's pension fund liability
was reduced to $360,000 payable in 80 equal quarterly payments
of $8,752 including annual interest at a rate of 8%. The Company
applied for relief as a "hardship case" pursuant to the
Settlement Agreement, and received approval to reduce its
quarterly obligations to $3,000 until such time as the Company
is out of hardship. As of January 31, 1999, the Company recorded
a write-down of $200,000 in order to reflect this liability at
its fair value of $149,379. The Company continues to make
quarterly payments of $3,000.
Page 7.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION:
Introduction:
EAC Industries, Inc., the Company, is a holding company with
currently one operating subsidiary, Flexible Printed Products,
Inc. ("Flexible"). Flexible produces and prints on plastic,
pre-cure in-mold heat transfer labels for the identification and
decoration of rubber and silicone hoses, belts and tire patches.
In June 1998, the Company completed the sale of substantially all
of the assets of Goodren Label Corporation (formerly Athena
Packaging Inc.). Goodren Label Corporation ("Athena"), a wholly
owned subsidiary of the Company, was in the business of producing
printed, laminated, embossed and hot stamped labels, wraps, seals
and decals for the cosmetics, pharmaceutical and health and beauty
aids industries. The aggregate sales price of $277,000 included
inventory valued at the lower of cost or market.
On March 1, 1999, the Company completed the sale of the operating
assets of Goodren Products Corporation ("Goodren"), a wholly-owned
subsidiary of the Company, for a price of $400,000 plus the
assumption of all trade payable liabilities. Goodren was in the
business of designing and providing point-of-purchase advertising
displays and wall decorations on semi-durable plastic.
The financial information presented herein includes: (i)
Consolidated condensed balance sheets as of April 30, 1999 and
January 31, 1999; (ii) Consolidated condensed statements of
operations for the three month periods ended April 30, 1999 and
1998 and (iii) Consolidated condensed statements of cash flows for
the three month periods ended April 30, 1999 and 1998.
Results of Continuing Operations:
Sales for the three-month period ended April 30, 1999 were
$347,000 as compared to $388,000 for the comparable period of the
prior year, reflecting a decrease of $41,000 or 10.6%. Cost of
sales as a percentage of sales was 68.8% for the three-month
period ended April 30, 1999 as compared to 71.8% for the
three-month period ended April 30, 1998.
Selling, general and administrative expenses decreased by $57,000
(from $201,000 to $144,000) when comparing the three-month periods
ended April 30, 1999 and 1998.
For the three months ended April 30, 1999 and 1998 the Company
reflected a net loss from continuing operations of $35,438 and
$90,531, respectively. This decrease in the operating loss was
primarily due to the reduced operating overhead as mentioned
above.
Page 8.
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Discontinued Operations:
In June 1998, the Company completed the sale of substantially all
of the assets of Goodren Label Corporation (formerly Athena
Packaging Inc.) for an aggregate sales price of $277,000 including
inventory valued at the lower of cost or market. On March 1, 1999,
the Company completed the sale of the operating assets of Goodren
Products Corporation ("Goodren") for a price of $400,000 plus the
assumption of all trade payable liabilities. See Note 2 of Notes
to the Consolidated Financial Statements for a further description
of these transactions.
For the quarter ended April 30, 1999, Goodren reported a loss from
operations of $34,736. The gain realized from the sale of the
assets of Goodren during the current period aggregated $240,218.
For the quarter ended April 30, 1998, Goodren and Athena reported
a combined operating loss of $12,969 and recognized a gain from
the sale of equipment of $233,000.
Liquidity and Capital Resources:
At April 30, 1999, the Company's working capital was $597,000
compared to working capital of $539,000 at its year ended January
31, 1999. Cash amounted to $597,000 at April 30, 1999 compared to
$468,000 at January 31, 1998.
The Company believes that its cash on hand will be sufficient to
fund planned operations for at least the next 12-month period. The
Company (primarily Flexible) has no planned capital expenditures
for the next year.
Other:
This report contains forward-looking statements and information
that is based on management's beliefs and assumptions, as well as
information currently available to management. When used in this
document, the words "anticipate," "estimate," "expect," "intend"
and similar expressions are intended to identify forward-looking
statements. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, it
can give no assurance that such expectations will prove to be
correct. Such statements are subject to certain risks,
uncertainties and assumptions. Should one or more of these risks
or uncertainties materialize, or should the underlying assumptions
prove incorrect, actual results may vary materially from those
anticipated, estimated or expected. Among the key factors that may
have a direct bearing on the Company's operating results are
fluctuations in the economy, the degree and nature of competition,
the risk of delay in product development and release dates and
acceptance of, and demand for, the Company's products.
Page 9.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports
(a) Exhibits:
(27) Financial Data Schedule
Page 10.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EAC INDUSTRIES, INC.
Registrant
/s/ Peter B. Fritzsche
Date: June 30, 1999
Peter B. Fritzsche
Chief Executive Officer and Principal
Accounting Officer
Page 11.
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EAC INDUSTRIES, INC.
EXHIBIT 27
FINANCIAL DATA SCHEDULE
ARTICLE 5 OF REGULATION S-X
The schedule contains summary financial information extracted from the
consolidated financial statements for the three months ended April 30, 1999 and
is qualified in its entirety by reference to such statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> jan-31-2000
<PERIOD-END> apr-30-1999
<CASH> 596,761
<SECURITIES> 0
<RECEIVABLES> 208,928
<ALLOWANCES> 20,000
<INVENTORY> 87,466
<CURRENT-ASSETS> 987,484
<PP&E> 392,693
<DEPRECIATION> 172,710
<TOTAL-ASSETS> 1,490,895
<CURRENT-LIABILITIES> 390,137
<BONDS> 251,593
0
0
<COMMON> 289,282
<OTHER-SE> 559,883
<TOTAL-LIABILITY-AND-EQUITY> 1,490,895
<SALES> 346,533
<TOTAL-REVENUES> 346,533
<CGS> 238,404
<TOTAL-COSTS> 238,404
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,478
<INCOME-PRETAX> (35,438)
<INCOME-TAX> 0
<INCOME-CONTINUING> (35,438)
<DISCONTINUED> 205,482
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 170,044
<EPS-BASIC> 0.06
<EPS-DILUTED> 0.06
</TABLE>
